Commission threatens ‘money’s worth’ mayhem

So much for simpler, risk-based prize promotion laws in 2007 when the Gambling Act 2005 comes into force. The new Gambling Commission is already suggesting that come 2007, keeping a prize draw 100% free entry may not be enough to keep it legal.

Topic: Promotion marketing

Who: The Gambling Commission

Where: London

When: January 2006

What happened:

In December 2005, the newly formed Gambling Commission sought informal comment from stakeholders on various issues relating to the up and coming new prize promotion laws arriving by way of the Gambling Act 2005 in September 2007.

One of the issues on which the Commission requested comment was the issue of what would constitute payment to enter a lottery.

Under existing UK prize promotion law, whether a payment has to be made to enter a prize draw is crucial to its legality. Under the new law arriving towards the end of 2007 there will be no fundamental change on that front, except in the case of purchase to enter prize draws where the price of the product that has to be bought is the normal price.

The relevant section of the new Act is Section 14. This provides that where an arrangement is put in place in which prizes are allocated to one or more persons by a process which relies wholly on chance, then that arrangement will be an illegal lottery if those persons are required to pay to participate.

"Transferring money's worth"?

Further clarification is offered by Schedule 2 to the Act. This states that the reference to "paying" in section 14 includes paying money and transferring money's worth.

During the months since publication of the Gambling Act 2005, concerns have grown as to whether the phrase "transferring money's worth" could operate so as to extend the situations in which activity relating to entry into a prize draw could make it into an illegal lottery.

One particular question that has been raised relates to the provision of data, perhaps by way of a lifestyle survey, as part of the entry process.

As previously reported on marketinglaw.co.uk, at a seminar held by Osborne Clarke in June 2005 on the new prize promotion laws, David Fitzgerald of the Department for Culture, Media and Sport was asked whether the provision of personal data by prize draw entrants could ever be regarded as "transferring money's worth".

Mr Fitzgerald said he did not believe this would be the case and in its response to the Gambling Commission's request for comments from stakeholders, the Direct Marketing Association recently sought the Commission's assurance on this point.

Gambling Commission view

So far, however, the DMA has been disappointed. An e-mail reportedly received by the DMA from Tom Cavanagh of the Gambling Commission made the following statement:-

"While we agree the basic point that David Fitzgerald was making, I should emphasise that we see a difference between a draw in which the entrant provides some basic information such as name, address and telephone number and one in which entry depends on the completion of a lengthy, detailed and intrusive questionnaire on the person's circumstances".

So it seems that the Gambling Commission's views on this aspect are not necessarily consistent with those of the DCMS as of the middle of last year.

The DMA has indicated that it disagrees with Mr Cavanagh's view and will challenge this if it is borne out in further pronouncements or draft guidance from the Commission.

Why this matters:

Marketinglaw has already expressed reservations as to whether the Gambling Act 2005 will, as promised by the DCMS, simplify and render less restrictive the UK's prize promotion laws. This is another example of why we have cause for concern.

We agree with the DMA that the Gambling Commission's views on this are wrongheaded and inconsistent with previous case law on the true meaning of "transferring money's worth"

Furthermore, Hansard makes it clear that the intention behind this phrase was to ensure that the wording was wide enough to catch new payment mechanisms being developed, for instance in an on-line context. Nothing more than that.

It is to be hoped that Mr Cavanagh's train of thought does not continue on its tracks.